(Tiểu luận) midterm reportthe impact of fintech innovations on the bankingsector in vietnam

FOREIGN TRADE UNIVERSITY FACULTY OF BUSINESS ADMINISTRATION ….o0o… MIDTERM REPORT THE IMPACT OF FINTECH INNOVATIONS ON THE BANKING SECTOR IN VIETNAM Group 11 Student’s Name Student ID Nguyễn Thu Anh 2111210012 Lê Gia Bảo 2112250017 Nguyễn Thị Quỳnh Anh 2112250011 Nghiêm Minh Anh 2113250004 Nguyễn Hà Phương 2113250034 Nguyễn Minh Huy 2112250040 Dương Hải Yến 2113250054 Nguyễn Quang Thành 2112250089 Class: KETE307(GD1-HK22223).1 Instructor: Mrs Tang Thi Thanh Thuy Hanoi, March 2023 TABLE OF CONTENTS TABLE OF CONTENTS INTRODUCTION CHAPTER OVERVIEW OF FINTECH AND BANKING 1.1 What is Fintech? 1.1.1 Definition of Fintech 1.1.2 Fintech industry: history and growth 1.1.3 The domains of Fintech 1.2 The Banking industry 1.2.1 Definition of Banks 1.2.2 How Banks operate 1.2.3 The Banking sector in Vietnam CHAPTER FINTECH INNOVATIONS AND THE IMPACT ON THE BANKING SECTOR IN VIETNAM 2.1 The Covid-19 impact on Vietnam Fintechs and Banks 2.2 Issues in traditional banking systems leading to fintech revolution in Vietnam 2.2.1 Availability 2.2.2 Operational issues 2.2.3 Cost of transaction 2.3 Fintech trends, innovations and leading companies in Vietnam 2.3.1 Fintech market trends in Vietnam 2.3.1.1 Significant growth in Vietnam Fintech market 2.3.1.2 Digital payment is the leading segment 2.3.2 Fintech innovations in Vietnam 2.3.2.1 Blockchain 2.3.2.2 Artificial Intelligence (AI) 2.3.2.3 Gamification 2.3.3 Leading fintech companies in Vietnam in Digital payments 2.4 Fintech’s impact on Vietnam's banking industry: Cooperation or Competition? 2.4.1 Fintech benefits on the banking industry in Vietnam 2.4.2 Fintech challenges for the banking industry in Vietnam 2.5 The future of Fintech in Banking CHAPTER RECOMMENDATIONS FOR BANKS IN VIETNAM 3.1 Focus areas for banks to overcome competition from fintech firms in Vietnam 3.1.1 Enhancing current services 3.1.2 Focus on unexplored areas 3.2 Revolution of Banking in Vietnam: a partnership between banks and fintechs 3.2.1 How can banks and fintech companies collaborate 3.2.2 Banks and Fintechs partnership examples in Vietnam 3.2.3 Benefits of partnership between Banks and Fintechs CONCLUSION REFERENCES INTRODUCTION How people bank and execute financial transactions has drastically changed during the past ten years as the emergence of fintech is responsible for this modification Fintech businesses were developed by a lot of entrepreneurs in response to the 2008 recession, when banks and individuals were having difficulty, and they had begun to hunt for new solutions Today, fintech is an expanding sector While financial technology has always advanced, it is arguable that in the digital age, development has accelerated due to advancements in the internet, mobile communications, machine learning, and information gathering and processing technologies The way that banks conduct business has changed significantly as a result of the emergence of new fintech companies that are providing cutting-edge technologies and services Fintech is not simply changing the financial environment but also putting traditional banks at risk Fintech businesses provide a wide range of services, including data analytics, investment banking, payments and wealth management To stay competitive in the market today, banks must embrace the fintech revolution, or risk falling behind Banks may create new chances for growth and stay ahead of the curve by utilizing the benefits of fintech This report focuses on clarifying cooperation trends for development of Fintech and the banking system The study uses secondary data from various sources, domestic and foreign research on Fintech activities The research results show that the co-development between financial technology companies and the commercial banking system is a major trend in the coming time CHAPTER OVERVIEW OF FINTECH AND BANKING 1.1 What is Fintech? 1.1.1 Definition of Fintech The combination of "financial" and "technology," or "fintech," refers to the incorporation of new technical developments into financial products and services Software, smartphone apps, and other technologies have been developed to enhance and automate conventional financial methods for both organizations and consumers FinTech can range from simple mobile payment apps to sophisticated blockchain networks that store encrypted transactions It describes the use of hardware and software to speed up, simplify, and increase the security of financial services and operations 1.1.2 Fintech industry: history and growth Fintech may appear to be a fresh wave of technology innovations, but the idea itself has been around for a while Since consumers no longer need to carry physical currency in their daily lives thanks to the invention of early credit cards in the 1950s, they are generally considered to be the first fintech products made accessible to the general public The development of fintech led to the inclusion of bank mainframes and online stock trading platforms One of the first fintech businesses to operate exclusively online, PayPal was established in 1998 This innovation has now been further transformed by mobile technology, social media, and data encryption - FINTECH 1.0 (1866-1967): A tool called PEN TELEGRAPH was created in 1860 to allow banks to validate signatures According to historians, 1866 left the first authentic financial imprints The installation of the transatlantic cables in this year ushered in a period of building global network infrastructure and linkages Often, Fintech historians overlook Diner's Card in 1950 as a significant and life-changing Fintech 1.0 event Although the beginning was modest and restricted to restaurant payments, this was the first sincere attempt to make your payments cashless, and it set the path for future development In 1958, Amex introduced the credit card as a result - FINTECH 2.0: Fintech 2.0 is seen as having started with Barclay's 1967 launch of the first ATM With the launch of NASDAQ as the first Electronic Stock Market, the fintech industry experienced significant development It greatly modernized the IPO process and altered how bidding is conducted This is considered as one of the most important Fintech advancements of all times Online banking and electronic commerce both developed in the 1980s For the first time, Tradeplus (E-trade) offered the E-trade to its clients in 1982 The development of e-commerce in the middle of the 1990s, which significantly increased the reliance on digital finance, was one notable development - FINTECH 3.0: The creation of Bitcoin, the first cryptocurrency, in 2009 and the development of P2P payment networks in 2011 Since then, the western world has been producing numerous new innovations and unicorns BaaS, RegTech, Digital Lending, InsurTech, Wallets, and many other industries are experiencing everyday development and innovation - FINTECH 3.5: Without extensive networks of intricate physical banking infrastructures, the fintech business grew extremely quickly in China and India The growth engine for 2014– 2018 is viewed as these and Fintech innovations in Africa This is driven by SaaS advancements, including, but not limited to, m-Pesa in Africa, Payment banks in India, and Alipay in China Fintech has evolved and grown throughout the years in reaction to changes in the larger technology sector This rise in 2022 was characterized by several dominant trends, including: - Digital banking is more accessible than ever before, and it's still growing Via digital-first banks, many customers currently manage their finances, apply for and repay loans, and buy insurance The global market for digital banking platforms is anticipated to expand at a compound annual growth rate (CAGR) of 11.5 percent by 2026, suggesting that this sector will continue to rise as a result of how straightforward and convenient they are - Blockchain: Decentralized transactions can be carried out using blockchain technology without the involvement of a government body or other third party Since several years ago, blockchain applications and technology have been expanding swiftly, and this pattern is anticipated to continue as more industries adopt high-tech data encryption - Artificial Intelligence (AI) and Machine Learning (ML): These two fields of technology have transformed the way fintech businesses scale and the services they provide to customers Reduced operational expenses, increased client value, and fraud detection are all possible with AI and ML Expect these technologies to play a bigger part in the development of fintech as they become more accessible and affordable, especially as more traditional banks convert to digital banking Fintech in Vietnam: Fintech began a significant expansion in Vietnam in 2017 The government should establish a Sandbox, an experimental legislative framework, for fintech in the nation, according to the State Bank of Vietnam's proposal The majority of top-tier corporate executives are aware of how crucial it is to change with the times To stay relevant, businesses must develop to keep up with customers' expectations, and fintech is the crucial tool of evolution for financial service organizations The number of fintech companies has quadrupled, from 39 at the end of 2015 to more than 154 by the end of 2021, according to the State Bank of Vietnam (SBV) and the Vietnam Fintech Market Report 2021 More than 70% of them are new businesses 1.1.3 The domains of Fintech Fintech is a vast and complicated field that is difficult to comprehend There have been certain recurring issues within fintech over the last decade that encompass multiple different sectors within finance and banking Despite various types and classifications of fintech, it can be divided into six domains: capital raising, deposit and lending, enterprise financial software, investment management, market providing, and payments Firstly, capital raising Capital raising entails giving clients access to investments and raising funds in exchange for equity or interest rates This domain is subdivided into two sections: alternative financing and crowdsourcing - Alternative finance, which is aimed at small and medium-sized businesses, refers to creative methods of raising capital that don't use typical incumbent financial institutions - Crowdfunding focuses on assisting businesses and entrepreneurs in raising funds for new goods, projects, or social initiatives Secondly, deposits and lending They are focused on personal services such as loans, financial management, and saving It is divided into three subdomains - Personal finance: assisting people and households in budgeting and managing their financial decisions and activities Electronic banking: an interactive online tool, which may be used by customers to pay bills, transfer payments, and have access to checking and savings accounts Alternative lending: complement the others by focusing on giving clients with credit ratings and peer-to-peer loans without referring them to established financial institutions Thirdly, enterprise financial software It refers to software or IT solutions designed for the financial industry Corporate finance software may also be divided into three categories - Collaboration and workflow software is cloud-based solutions and platforms that improve internal communication and process efficiency Accounting and invoicing software assists financial organizations in reducing the amount of time and resources spent on accounting and invoicing Data and analytics software assists financial institutions in combating fraud, security concerns, and cybercrime Fourthly, investment management, services which assist private and institutional investors in the purchase, sale, and management of assets and securities - Private investment management refers to automated procedures and trading algorithms provided to private investors, or other tools to trade and manage their investments Institutional investment management is concerned with tools and technology that help institutional customers, such as professional investors or hedge funds, and investment institutions manage their investment portfolios Fifthly, market supply Market supply is divided into two categories: comparison and matchmaking, which are online aggregator platforms that enable clients to locate and compare financial goods and services Then there are financial social networks, which focus on the use of social networks to allow contact between buyers and sellers as well as to demonstrate financial literacy and inclusion Sixthly, payment In terms of investment interest, this is the most popular domain Payment services include payment back-end infrastructure, card issuing, merchant acquiring, mobile payment, seamless solutions and point-of-sales solution Payment processing companies, electronic payment systems, point-of-sale terminals, card providers, and mobile payments are all included Consumer payments include mobile wallets and seamless payment solutions that allow payers to pay on the move, as well as peer-to-peer money transfers Moreover, cryptocurrency, providing access to digital cryptocurrency markets such as Bitcoin, is used for payments and is quickly gaining popularity Cryptocurrency is a type of cryptocurrency that is not governed by a central body and is stored and traded using specialized software and mobile applications Although cryptocurrency has minimal inherent worth, several nations are using it as a means of exchange, storage, and measurement of value due to its near-perfect security, ease, and speed In conclusion, fintech can be classified into six domains: capital raising, deposit and lending, enterprise financial software, investment management, market provision, and payments Document continues below Discover more from: trị kinh Quản doanh quốc tế QTR401 Trường Đại học… 289 documents Go to course [Giáo trình] Kinh tế 127 quốc tế Phần -… Quản trị kinh doan… 100% (7) Khóa luận tốt nghiệp 99 Thực trạng giải… Quản trị kinh… 100% (2) N2 ビジネスのための 136 日本語初中級 -… Quản trị kinh… 100% (2) Tailieuxanh bai tap him 8554 Quản trị kinh doan… 100% (1) Case study - N/a 1.2 The Banking industry Quản trị kinh doan… 100% (1) 1.2.1 Definition of Banks A bank is a financial institution regulated at the federal level, state level or both The lending primary role of Credit banks is to take deposits and make loans, but banks can offer a wide range of products and services, management theor… including: - 32 Deposit accounts (checking accounts, savings accounts, CDs, money market Quản trị accounts) 100% (1) Loans, including mortgage loans, auto loans and personal loans kinh doan… Credit cards Check-cashing services Wealth management services Insurance Business banking 1.2.2 How Banks operate Banks, whether brick-and-mortar institutions or online, manage the flow of money between people and businesses More specifically, banks offer deposit accounts that are secure places for people to keep their money Banks use the money in deposit accounts to make loans to other people or businesses In return, the bank receives interest payments on those loans from borrowers Part of that interest is then returned to the original deposit account holder in the form of interest—generally on a savings account, money market account or CD account Banks primarily make money from the interest on loans and the fees they charge their customers These fees can be tied to specific products, such as bank accounts or related to financial services For example, an investment bank that offers portfolio management to investors can charge a fee for that service Or, a bank may collect an origination fee when granting a mortgage loan to a homebuyer 1.2.3 The Banking sector in Vietnam Business results increased over the same period Despite the impact of the pandemic, the banking industry's profits still grew at a high rate, with more than a dozen banks recording trillions in profit, asset quality, and bad debt ratio were still well controlled According to FiinGroup data, total operating income in the first quarter increased 28.4 percent year-on-year At the beginning of July, a number of banks announced business results with a strong breakthrough, forecasting many new records in the profit picture of the banking industry The introduction of a new policy That is the close attention and direction of the State Bank (SBV), ministries and agencies for the development of substantive credit growth of the banking sector and issued Circular No 03/2021/TT - The State Bank of Vietnam on structuring the repayment term and exempting loan interest due to the impact of the Covid-19 epidemic The banking group recorded stories of capital issuance and sale of subsidiaries to foreign countries In the midst of the outbreak of the epidemic, which almost foreign investors withdrew from the stock market, and strong net selling, foreign investors still saw opportunities in asset transactions of banks Typically, VPbank sold 49% of Fecredit's capital to a Japanese corporation, another plan in the future like HDbank to also sell credit to foreign banks Non-credit finance continued to increase In the context of the epidemic, in the first months of 2021, the banking group continued to sharply increase the size and proportion of service fee income and non-interest income such as customer guarantees, letter of credit (LC) guarantees, payment of credits, and payment orders non-cash payment, linking with insurance companies to cross-sell products (Bancassurance), securities This helps commercial banks develop more comprehensively, no longer depending on credit norms, while minimizing risks and improving revenue structure towards sustainability